ProFounder: Putting investors wheels in motion

This article was taken from the
September 2011 issue of Wired magazine. Be the first to read
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Venture
capital just got crowdsourced.
ProFounder allows
entrepreneurs to raise capital from private investors, as little as
$1,000 (£650) a time -- something that other crowdfunding sites
such as IndieGoGo and Kickstarter
can't legally do. Cofounders Jessica Jackley and Dana Mauriello,
who cofounded micro-lending platform Kiva, spent a year
talking to lawyers before they found a financial exemption that
allows company owners to issue securities to "uncredited,
unsophisticated investors". You and me, in other words.

In the six months since its launch, ProFounder has raised almost
$500,000 from 304 investors for 18 companies. One such company is
Cubic Motors, a stealth startup developing an electric
motorcycle (above). Cofounder Marc Fenigstein needed money for
a prototype to show angel investors, but for intellectual-property
reasons couldn't go public with designs. So with ProFounder he
asked friends and family for $1,000 of investment each in exchange
for a share of revenues. It took just 16 replies to raise the
capital.

"Eighty-seven percent of all funding in the US that goes to
private businesses every year comes from friends and family," says
28-year-old Mauriello. "We're taking what's happening online and
making it less expensive and more convenient." ProFounder currently
operates only in the US, but Jackley says the model "is going to be
something we can perpetuate far and wide". The company itself has
$1.35 million in seed funding, raised more conventionally.
"Unfortunately," says Jackley, "we didn't have our platform built
then."

Edited by Alice Vincent

Comments

It's about time there's finally some sort of crowdfunding option for US companies. I know there's similar platforms for U.K. companies, like CrowdCube, as well as platforms like VentureBonsai.com for the rest of Europe.